Starting a business may seem overwhelming, but forming an LLC is a great way to protect yourself and your assets while taking the first steps on the path to success. An LLC, or limited liability company, is a business structure that provides legal protection for its owners—usually referred to as members—just like a corporation.
Forming an LLC isn’t difficult and can be done in just a few simple steps. With the right guidance and preparation, you could have your LLC up and running in no time. In this blog post, I’ll provide you with an easy-to-follow guide on how to start an LLC.
By the end of this post, you’ll understand what goes into forming an LLC and be confident in following each step of the process. Let’s get started!
Step 1: Choose a Business Name
Creating an LLC is a big commitment, and that starts with choosing the right name. Your LLC name should accurately reflect the purpose of your business while also being unique and distinguishable from other LLCs. It's important to note that the government won't allow you to include any restricted words (like ‘bank’ or ‘attorney’).
When deciding on your business name, it's a good idea to do a quick search on Google and the state government database to make sure no one else has already claimed it. Additionally, you should check to see if the same or similar name is trademarked on the federal level—this way, you can be sure you won't run into any legal issues down the road.
Finally, be sure to pick a name that is easy for customers to find—think about how people will search for your company online, then make sure your business comes up first in searches by using commonly searched words related to your industry. This has twofold benefits: customers can easily locate your business and you may even get picked up in web searches even if people don’t know your company's exact name.
Step 2: Create an LLC Operating Agreement
You've finalized the formation documents, now it's time to create an LLC operating agreement. An LLC operating agreement is a document that outlines the ownership and operation of your LLC. It explains things like how profits and losses are handled, who the members of the LLC are, and how decisions are made.
Creating an LLC operating agreement is an important step in setting up your business. Without it, you could find yourself in a legal dispute if a conflict were to arise. Your agreement should be tailored to your specific company, but there are some basic things you should include:
The members of the LLC and their roles
How many contributions or investments will be handled?
How decisions will be made
How profits and losses will be distributed
What happens when someone wants to leave or join the LLC
How disputes between members would be resolved.
Writing up an LLC operating agreement can seem daunting at first, but you must have one that works well for your business. Make sure to take your time while writing it so you don't miss any key aspects of the document.
Step 3: Register Your LLC With the State
Now that you've chosen a name and filed your LLC formation paperwork, it's time to register your LLC with the state. You'll need to look into the rules and regulations for doing this as each state is different.
Typically, you will need to file an application for registration with the state, which includes:
A completed application form
The filing fee (this varies from state to state)
The consent of the registered agent
Supporting documents if required by your state
You can potentially do this online or in person depending on where you live, and some states also allow mail submission. In any case, once your application is accepted by the relevant office, you'll be ready to go and can officially begin doing business as an LLC.
Step 4: Obtain an EIN for Tax Purposes
The next step in how to start an LLC is to get an Employer Identification Number (EIN) from the IRS. An EIN is basically like a social security number for your business, and it helps you identify your LLC when dealing with taxes or other legal matters related to your business.
Getting an EIN is actually quite simple. You'll need to fill out an application on the IRS website, where you'll provide details about your business and answer some questions. Once that's done, you just submit the application and the IRS will assign you an EIN. You may also be asked to provide a few documents verifying the information you provided on the form, so make sure you have those ready before starting the process.
You can also get help applying for an EIN by calling the IRS hotline at 1-800-829-4933 or by visiting an IRS office near you for assistance with this step. Just make sure that when dealing with either of these options, you have all of your documents ready, and don't forget to keep records of everything related to this process so that there's a clear paper trail of your LLC formation.
Step 5: File Annual Reports & Fees
Alright, we're getting to the final steps of setting up your LLC. Step 5 is all about filing annual reports and fees.
Generally speaking, each state has different requirements for when LLCs need to file an annual report or renew their registration fees. Some states don’t have reports and fees at all, while some require you to file an annual report or fee every year. Each state’s website will have different requirements—just look around until you find what works best for you.
In most cases, filing an annual report will come with a fee. This fee will depend on the size of your LLC and the state that you’re in—it can range from $25-$500 per year. And with the report comes the responsibility of keeping your LLC up-to-date with its main address, officers list, and other required info.
But no need to worry—staying on top of these reports is easy. Just make sure to check in every once in a while to see when they’re due so that you don’t miss any deadlines!
Step 6: Start Doing Business With Your LLC
Great job! You've finished your LLC registration application and submitted it. Now you just need to do one last thing so you can get your business up and running — start doing business with your LLC.
To get things going, the next steps involve setting up bank accounts, accounting procedures, and contracts that reflect the LLC’s legal standing. Here are some things to do:
Open a bank account
It's important to open a separate checking account for your LLC that is dedicated only to LLC funds. This will help you keep track of the income and expenses that go through your company. Plus, it’s required by most states for all LLCs to maintain separate accounts from personal funds.
Get an employer identification number (EIN)
An employer identification number (EIN) is like a Social Security number for businesses — it’s used for tax filing and other legal matters related to the business. If you plan on hiring employees or applying for loans or lines of credit, you’ll need an EIN from the IRS. It’s used instead of a personal Social Security Number when filing taxes or describing a business in official documents.
Develop contracts
Develop contracts that reflect the nature of the relationship between members of an LLC to make sure each member's responsibilities and rights are outlined clearly in case disagreements arise within the group down the line. This document should also detail each person's share of profits as well as their percentage of ownership in the company.
Once all these steps are completed, you finally have an active, functioning LLC with everything on file! Now all you have to do is enjoy running your business!
Conclusion
Starting an LLC may seem like a daunting task, but following the steps outlined in this guide can simplify the process. Starting an LLC can protect your business from personal liability and provides the framework for growth and success.
By taking the time to research the state-specific requirements for forming an LLC, you can ensure that you are in compliance with the laws. Additionally, setting up an LLC requires more than filling out the paperwork—you will need to establish business operations and complete other tasks to succeed.
By following these steps and being prepared, you can get your LLC off the ground and running in no time. With the right know-how and preparation, you’ll be well on your way to the success of your business.
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